State will chase those who cheat banking system: FM Jaitley

Union Finance Minister Arun Jaitley on Tuesday said that it was incumbent on the state to chase down those who cheat the banking system.

"It is incumbent upon the state to chase those who cheat the banking system," the Finance Minister said at the 41st Annual Meeting of Association of Development Financial Institutions in Asia and Pacific (ADFIAP).

Jaitley asserted that the banking system depends on trust, which lays the foundation for the relationship between the borrower and the lender.

He, however, stressed that the government gave authority to the bank management to work with autonomy. And one expects effective utilisation of the authority.

"When authority is given to the management then you are expected to utilise authority effectively and in the right manner and therefore a question for management is if they were found lacking, on the face of it seems they were," he said.

He said that supervisory agencies needed to assess what new systems had to be put in place to find those who were cheating banks.

"Also what were auditors doing? If both internal and external auditors have looked other way and failed to detect then I think CA professionals must introspect. Supervisory agencies also must introspect what are the additional mechanisms they have to put in place," the Finance Minister concluded.

For those unversed, the Punjab National Bank detected a 1.77 billion dollar scam in which jeweller Nirav Modi acquired fraudulent letters of undertaking from one of its branches for overseas credit from other Indian lenders.

The scam was started in 2011 and was detected in the third week of January this year, after which the PNB officials reported it to the concerned agencies.

Meanwhile, the PNB filed a second complaint with the CBI on February 13.

The CBI had received the complaint from the PNB on January 28 and a case was registered in the case on January 31.